Financial independence is an opportunity to live an easy life. How can you achieve financial freedom? 

Let’s start with the fact that there are different levels of financial independence. Determine what level you are at right now. 

Levels of financial freedom

Level 1. No debts

Debt is a situation where you need to give away more than you have. A loan is not considered debt if you use the funds in a beneficial way, such as using a credit card with an interest-free period and cashback. You can achieve financial independence at this level with any level of income. The main thing is to live within your means and manage your budget wisely. 

Level 2. Have a reserve for emergencies

Always have some spare money in your account in case you get sick, your car breaks down or you lose your job. You know that no matter what happens, you will have the finances. You can hang on for a while and find a solution to the problem.

Level 3. Passive Income

You have sources of passive income. This could be investment income, rental income, royalties, and more. 

Level 4. Financial stability

At this level, your monthly expenses are fully covered by passive income. In addition to this, you have reserves and insurances. 

Level 5. Full financial freedom

There is enough money not only for basic needs and achieving all goals, but also for fulfilling any desires.

It is difficult to achieve complete financial independence. But those who strive to go through the previous steps have a much better chance.

How to become financially independent in 12 months

Make a plan 

Evaluate your expenses and income and think about where you can save money. Develop a strategy for paying off debt, building up capital and investing it. Make a detailed financial plan for a year, or longer term but not as detailed. When planning your spending, aim for a formula of 50% for necessary expenses, 30% for wants, 20% for investments and savings.

Increase your knowledge

To gain financial freedom, education is essential. Research the investment market and gather as much information as you can. Talk to professionals and consult with financial advisors. 

Get out of debt

Take your financial independence to the next level. If you have high-interest debt, try to pay it off as quickly and favourably as possible. You can take advantage of refinancing to get favourable terms and a lower interest rate. 

Save money 

Financial savings can help you avoid new debts. You can set aside 20% of your income and save enough in a year to take it to the third level – creating passive income. 

Increase income

Upgrade your skills, look for jobs with big salaries, and develop your own business.

Create capital

The journey to the final levels of financial independence will be a long one, but you can start now. Refer to a financial plan. If your salary allows you to not only set aside a financial reserve but also save for other goals, do it. Start investing at least 3-5% of your income. 

Get passive income

Invest your first money in stable assets. Learn how it all works. This will help you avoid risks. 

Improve your credit rating 

For financial wellbeing, it is important to get favourable loans, which depends on your credit rating. Always keep it under control and work on improving it. 

Be responsible with your finances, avoid taking unnecessary risks and gradually move towards your goal.